Time to invest? Top 10 ‘safe stocks’ to buy after the 3000-point fall in Sensex

With the market correction of past 10 days, the stock prices of some of these PSUs have seen rough treatment, resulting in the possibility of healthy dividend yields, said the Centrum report.

  

The S&P BSE Sensex has plunged over 3,000 points from its record high of 36,443 hit on January 29, 2018, but there were plenty of stocks which managed to outperform the index by a wide margin.

The nervousness in the market is emanating from both global as well as domestic factors, but investors with a long-term horizon should not get scared with the correction. Indian market is still in a bull run and dips should be used to dip into quality stocks.

In the short term, global cues and their impact on liquidity will make Indian market volatile. But, back home strong long-term fundamentals of India, and liquidity support from domestic institutional investors are likely to cushion the fall if any.

“India has gone into a double whammy under the domestic and global headwinds. After a setback from Union Budget, the domestic market has shifted focus into the global volatility which is turning cautious due to premium valuation, increase in interest rate and risk of de-globalisation.

“The right strategy would be to churn your portfolio towards defensive sectors and reducing high beta stocks should be the key of the retail investors,” he said. In the short-term market may have a positive bias, during which the investors should consider to shift the portfolio into low beta.

Talking of stocks which can weather all storm are Dividend Yielding stocks. In the current economy, where bank fixed deposits offer interest rates to the tune of 6-7 percent, there are stocks which are giving dividend yields similar to that.

“Further, the interest on bank fixed deposits is taxable whereas the dividend from equity is completely exempt from tax (except when the dividend income in a financial year exceeds Rs.1 Mn),” Centrum Wealth Research said in a report.

“In that context, post-tax dividend yields of some of the stocks are way higher than the post-tax interest yield on bank fixed deposits. So, investors can consider some of the high dividend yield stocks to bring in regular inflows,” it said.

Based on the historical evidence, PSUs have been high dividend payers to address the fiscal deficit of the government to balance the tax collection shortfalls.

Some of the stocks such as Coal India have seen huge dividend payouts over the years. The fourth quarter of the financial year traditionally provides maximum activity in terms of PSU dividends.

Further, there was a huge drop in dividend payment by RBI to the government for its financial year ending June 30, 2017, owing to disinvestment at Rs 30,659 crore as against dividend of Rs 65,876 crore in the previous year. So, there may be dividend catch-up needed from other profit-making PSUs.

With the market correction of past 10 days, the stock prices of some of these PSUs have seen rough treatment, resulting in the possibility of healthy dividend yields, said the Centrum report.

MORE WILL UPDATE SOON!!

Buy, Sell, Hold: 6 stocks and 1 sector are on analysts’ radar on March 7, 2018

HCL Tech, Bharat Forge, Sun Pharma and financials sector are being tracked by investors on Wednesday.

HCL Tech

Brokerage: CLSA | Rating: Buy | Target: Rs 1,170

The brokerage house believes that the company is likely to see a growth recovery in IMS and said that apps & engineering are growing ahead of peers. There is a valuation discount to peers, which suggests that there are concerns on IP licensing strategy. Having said that, the firm offers absolute upside from growth & rerating, the report added.

USL

Brokerage: Morgan Stanley | Rating: Underweight | Target: Cut to Rs 3,250

The global research firm has cut FY18-F20 earnings estimates by 11-17% on account of weak Q3. At 43x F2020e P/E, risk reward appears balanced, it said, adding that amid uncertainty on the levy of GST on ENA, one could await a better entry opportunity.

Bharat Forge

Brokerage: Morgan Stanley | Rating: Equalweight | Target: Rs 659

Morgan Stanley said that NAFTA Class 8 Sales May Peak In 2018 With 26% Growth. Further, it sees a scope for decline in these sales by 5% in 2019 & 11% in 2020. Overall, it expects 30% growth in FY19/2018 NA truck exports.

Bharti Airtel

Brokerage: Nomura | Rating: Buy | Target: Cut to Rs 505

Nomura remains sanguine on earnings recovery In FY20. Further, deleveraging via asset monetisation should be another catalyst. At 7.4X, FY20 EV/EBITDA, stock is not cheap vs regional peers.

Sun Pharma

Brokerage: CLSA | Rating: Sell | Target: Rs 430

The brokerage house said that three observations for Halol related to deviation from certain ops & procedures. If the US FDA is satisfied with response, Halol plant could be upgraded to VAI. If upgraded, it would revive the approval cycle & warning letter

could be lifted.

In base case, it is building incremental revenue of $100 m/$150 m For FY19/20 From Halol, while in bull case it is building incremental contribution of $200 m/$300 m for FY19/20 From Halol. A delay in clearance beyond the estimated timelines could

delay US recovery.

Adani Ports

Brokerage: Goldman Sachs | Rating: Buy | Target: Rs 488

Higher containerisation & benefit of better connectivity will support growth, it said, adding that diverse geographic & cargo exposure limits potential impact from slowdown. The firm will continue to see market share gain, it said.

PSU Banks

Brokerage: Credit Suisse

Credit Suisse said bond hit will add to Q4 woes and over-ownership will weigh on earnings. It observed that PSU banks are staring at potential treasury loss of Rs 20,000 crore In Q4. The current 10 percent excess bond holdings are the highest in the last 12

years. It continues to prefer private over PSU banks.

NBFCs

Brokerage: Morgan Stanley

The firm observed that higher rates are here to stay and one must stick to non-bank NBFCs. It likes NBFCs structurally, but most will de-rate over the next year.

Banks

Brokerage: Jefferies

Jefferies continues to prefer private sector banks, especially corporate oriented ones. It is also positive on banks with greater moats around retail liability. It likes Yes, Axis, ICICI and HDFC Bank. It is perennially positive on HDFC Bank. Meanwhile, it said that private corp banks available at comparatively inexpensive valuations. Further, the Street is not pricing in recovery in earnings and is narrowly focusing on near term asset quality issues. It prefers private sector banks and said that valuation gap has opened up between SOE Banks & Private Sector Banks.

MORE WILL UPDATE SOON !!

Selling pressure may drag Nifty to 10,100; 3 stocks which could give up to 17% return

The overall data is still running negative for the markets and we can see further selling pressure coming into the market which can drag Nifty towards 10100 levels in coming sessions.

  

The Nifty 50 index hammered down badly after breaching the crucial support of 10,400 levels this week. The fall was majorly supported by banks after investigation deepened in the PNB fraud case.

Since the beginning of the series, we have seen call writers actively selling calls of 10500-10600 and 10700 strikes which clearly indicates discomfort in the market.

The derivative data indicates that selling pressure on higher levels may remain intact with Nifty having major resistance now placed at 10,400 and 10,500 levels.

As far Bank Nifty is concerned the next support is placed at 24,200 spot while resistance is placed at 24,700 and 24,800 levels.

The overall data is still running negative for the markets and we can see further selling pressure coming into the market which can drag Nifty towards 10,100 levels in coming sessions.

Here is a list of top three stock ideas which can give up to 17% return:

Bharat Bijlee Limited: BUY| Target Rs 1870| Stop Loss Rs 1480| Return 14%

After taking a support at its 100-days exponential moving average (DEMA) on the daily charts, the stock has risen sharply in the recent past to reclaim the levels above its short-term moving averages.

On the daily interval, the stock has formed an inverted head and shoulder formation and has also given a pattern breakout above the neckline last week.

The breakout in prices happened with marginally higher volumes which suggest for more upside in prices moving forward. Traders can accumulate the stock in a range of 1630-1660 levels for the target of 1870 with a stop loss below 1480.

V-Mart Retail Limited: BUY| Target Rs 2110| Stop Loss Rs 1625| Return 17%

The stock has been consistently trading higher and has been forming higher highs and higher lows on the daily and weekly interval charts.

At the current juncture, the stock has formed an inverted head and shoulder formation on the daily charts and also given a pattern breakout above the neckline placed at 1700 levels.

Additionally, positive divergences in the secondary indicators like stochastic and RSI also support the next up move in prices. So, traders can accumulate the stock in the range of 1800-1835 for the upside target of 2110 with a stop loss below 1625.

Gujarat Ambuja Exports Limited: BUY| Target Rs 306| Stop Loss Rs 250| Return 13%

The stock has been trading higher on the daily charts since the beginning of 2018 and tested its 52-week high last week. Additionally, the stock has formed a bullish flag formation on the weekly interval and given breakout above the pattern last week.

This week prices have retraced toward 260 levels on the back of profit booking. However, any break above the 270 levels will once again support the next upside move in prices as suggested by momentum indicators.

Traders can buy the stock above 270 levels for the upside target of 306 with a stop loss below 250.

MORE WILL UPDATE SOON!!

Top five sectors which are looking attractive post recent correction

As attractive as PSU banks may seem, we would recommend sticking to private banks i.e. if one wants to invest in the banking space.

 

The selloff by foreign investors (FIIs) that we have witnessed in the recent past is expected to be offset by the liquidity flows into equities from the domestic household savings. We believe that as long as this remains strong, volatility should remain curbed to a large extent.

However, given the high expectations from the earnings – as gauged by the higher multiples that the markets are garnering – as well as the many state elections lined up this year; we expect 2018 to be fairly volatile.

The year will not be anything like 2017, where we saw a run up across the board. A stock specific approach is the way to go.

A good way to have sector-wise allocation would be to mimic the benchmark indices – such as the Nifty 50 or the BSE – 100 or 200 indices.

As attractive as PSU banks may seem, we would recommend sticking to private banks i.e. if one wants to invest in the banking space.

We remain positive on the agri/ rural plays, consumption themes, housing theme as well as the infrastructure space.

A lot more information would be required (such as already existing investment and savings profile, the lifestyle of the investor, the risk appetite, his knowledge on equity investing) to answer such a question.

Let us go with the assumption that the candidate mentioned above has no savings, we would recommend a staggered approach towards investing in equities rather than investing all the amount in one go.

By the end of one year, the investor should have at least 30-40% of his money in fixed income and the balance split between MFs and equities (direct).

While banks will look to pass on the prices, keeping a gauge on the asset quality will be critical.

MORE WILL UPDATE SOON!!

Use pullback rallies to short Nifty; 3 stocks which could give up to 11% return

We expect any bounce back to be mild and short-lived since any retracement will be utilized by lead players who will further jump and cap upside.

  

The Nifty gave a decisive breakout of a Flag pattern that was in place for a month, coupled with negative domestic cues that aided the sentiments of bears.

After a month, consolidation came to an end with this breakout as Nifty hits a fresh low of 2018 and closed at the lowest level in 10,249 on Tuesday. The Bank Nifty followed the path with a decisive break and ending down at 24,448 after hitting a low of 24,362.

A lot of cues, fundamentally or economically, affected the market and primary bulls in the last few weeks. It started off with the global sell-off, correction, and as soon as Nifty was trying to form a base, we witnessed a Banking scam which is widespread to other banks tanking the PSU bank Index more than 20 percent.

Further, a trade war recently announced to fetch a favorable deal in NAFTA further fueled the heavyweight sector like metals which bend down to bears tune.

While in due course of time all the good news related to GDP, PMI and IIP have been absorbed on the domestic front. A flag pattern breakout is seen on the daily chart. It is a continuation pattern out of which we have seen a breakout in a favorable direction of previous swing, bearish.

The flag pattern is a very reliable pattern and thus further indicates the momentum may continue, as we earlier mentioned, towards a deeper cut in prices.

Secondly Nifty has been below its short-term moving averages (MA) and this time it is below its crucial 100-day MA which it was long-standing for a year.

Thirdly, we also see two heavyweight sectors like banking and metal in stress due to recent news flow. While on flipside, the currency market is showing a weakness in rupee, which will further aid overall bearish scenario in coming sessions.

We expect any bounce back to be mild and short-lived since any retracement will be utilised by lead players who will further jump and cap upside. We maintain sell on any rise strategy for lower targets of 10,050 - 9,850.

Here is a list of top three stocks which could give up to 11% return in the short term:

Biocon Ltd: BUY| Target Rs 660| Stop Loss Rs 610| Return 4%

The stock is seeing some bit of consolidation after the recent upward move while a bullish continuation flag is seen which provides an opportunity to rise the primary trend for an upside target towards Rs660 while a stop loss can be placed at Rs610.

NTPC Ltd: BUY| Target Rs 173| Stop Loss Rs 158| Return 6%

The stock is seeing a bottom formation on the daily chart as its trying to reverse from an oversold territory.

The oscillators that gauge momentum are displaying a bullish momentum and a positive divergence that may keep price upward in short-term with a retracement to Rs173 while a stop can be placed at near support of Rs158.

Godrej Consumer Products Ltd: BUY| Target Rs1210| Stop Loss Rs1055| Return 11%

Godrej has given a bullish breakout as per candlestick patterns after a decent pullback in price. On the chart, the trend is positive with prices making higher high and low while volume has also seen a surge in prices coming out of consolidation.

We expect the momentum to continue with next resistance at 1210 while a near-term support at 1055 can be seen as a stop.

MORE WILL UPDATE SOON!!

Brace for volatility in 2018; prudent to follow bottom-up approach: Emkay’s Karwa

Karwa attributes current fall in the market to weak local environment which involves the PNB bank scam, along with global challenges such as hardening of interest rates.

  

The year of 2018 has not been a great year for the market so far as frontline indices have reported negative returns. This especially becomes significant when compared to the stellar returns seen on the Street in 2017.

Experts at Emkay Global believe that the story is not over yet as investors must brace for a volatile year ahead.

At the base of it, our markets were heavy in terms of valuations and a market needed a reason too, and these factors gave the impetus.

Current fall in the market to weak local environment which involves the PNB bank scam, along with global challenges such as hardening of interest rates. Additionally, investors are looking to take their profits off the table in areas where they have made money.

So, it would be prudent for investors to have a strong bottom-up approach, he said, adding that look out for stocks which are undervalued and have strong earnings growth.

Trends for the fourth quarter also reveal that they are on the right track. Having said that, factors such as interest rates hardening could limit the upside on stocks despite good earnings.

In the auto space, he said that two-wheelers and four-wheelers continued to perform well.

Meanwhile, among infra names, ports and roads, among others, offer good opportunities for investment.

For financials, he believes PSU banks can be an opportunity from 12-18 months perspective, but one has to be cautious on a sector such as NBFC on the valuation front. In the long term, there may be opportunities in this space.

Lastly, on the pharma sector, he highlighted how most issues with US FDA are softening. Many companies are reworking their business model. Possibly in 12-18 months, you could see opportunity for patient contra investors..

MORE WILL UPDATE SOON!!